Values and Valuation
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Monetary Momentum Timing Model
Note: As described under the Investment Philosophy page I look to models to describe the relative risk/reward setup of stocks or bonds as an asset class. If the model goes on a sell signal it does not necessarily mean I would exit the market all together. Rather I would adjust trade entry criteria, position sizing, and risk management techniques based upon the increased probability of a volatile and/or declining market.
This model functions as a composite of moving averages combined with monetary filters. The model was back-tested on data going back to 1985. It assumes that the account started with $300 and purchased or sold short the Standard and Poors 500 index on the first signal for one dollar per index point (for example the first purchase occurred on March 1st, 1988 when the index was at 267.21 for a total cost of $267.21). The model returns 934% on initial capital compared to 447.83% on a buy and hold approach. This model functions with a 7% trailing stop.